ECONOMICS
COMPOUND INTEREST
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Larbie deposited $500 in a new account.The bank pays 5% compound interest. She does not make any withdrawals or deposits for 4 years.How much interest will she have earned at the end of 4 years?
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$607.75
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$107.75
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$100
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$600
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Explanation:
Detailed explanation-1: -Using the rule of 72, you would estimate that an investment with a 5% compound interest rate would double in 14 years (72/5).
Detailed explanation-2: -I=10020000×2×5=Rs. 2, 000. Was this answer helpful?
Detailed explanation-3: -Solution: We use the present value formula, where A is $20, 000, r is 6% or 0.06, n is 12, and t is 5 years. Approximately $14, 827.45 should be invested today in order to accumulate to $20, 000 in five years.
Detailed explanation-4: -Here’s the simple interest formula: Interest = P x R x T. P = Principal amount (the beginning balance). R = Interest rate (usually per year, expressed as a decimal). T = Number of time periods (generally one-year time periods).
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